Justia Insurance Law Opinion Summaries

A software company that provides donor management and data hosting services for nonprofit and educational entities experienced a significant ransomware attack. Hackers accessed and exfiltrated sensitive client data over several months, leading to widespread concern among the company’s clients about the adequacy of the company’s response. Rather than conducting a thorough investigation and remediation itself, the company provided clients with a toolkit for self-investigation and remediation. Dissatisfied, the clients undertook their own investigations and incurred expenses for legal counsel, notifications, credit monitoring, and other remedial measures. Insurance carriers that had issued policies covering such cyber incidents paid out claims for these losses, then sought to recover from the software company as subrogees and assignees of their insured clients.The Superior Court of the State of Delaware initially dismissed the insurers’ complaints for failing to state a claim and, after amended complaints were filed, dismissed them with prejudice. The Superior Court reasoned that the insurers failed to provide sufficient factual support for each insured’s claim by pleading in the aggregate, and further found that proximate cause had not been adequately alleged, as the complaints did not link the damages to any specific contractual obligation.On appeal, the Supreme Court of the State of Delaware reviewed the Superior Court’s decision de novo. The Supreme Court held that the insurers, as subrogees/assignees, adequately pled a breach of contract claim under New York law, which governed the agreements, and that Delaware’s notice pleading standard was satisfied. The Court found that the amended complaints sufficiently alleged the existence of contracts, performance by the insureds, breach by the company, and resulting damages, and that proximate cause was properly pled. The Supreme Court reversed the Superior Court’s dismissal and remanded for further proceedings. View "Travelers Casualty and Surety Company of America v. Blackbaud, Inc." on Justia Law

In 2019, a tornado struck the home of the insured homeowners, causing significant property damage. The homeowners held a policy issued by their insurer, which included an $87,156 deductible for losses caused by “Windstorm or Hail.” The policy did not define “windstorm.” The insurer applied this deductible to the homeowners’ claim, asserting that the tornado damage was subject to the windstorm deductible. The homeowners disputed this, arguing that a tornado is not a “windstorm” as commonly understood and that the deductible should not apply.The dispute led to litigation in the 68th District Court of Dallas County, where both parties filed motions for summary judgment based on the interpretation of the term “windstorm.” The trial court ruled for the insurer, finding that a tornado qualifies as a windstorm and applying the deductible. On appeal, the Court of Appeals for the Fifth District of Texas reversed, holding that “windstorm” was ambiguous in the policy context and could reasonably be read to exclude tornadoes. The appellate court rendered judgment for the homeowners, concluding that the ambiguity must be resolved in their favor.The Supreme Court of Texas reviewed the case and reversed the appellate court’s decision. The Supreme Court held that, when undefined in a homeowners insurance policy, the ordinary meaning of “windstorm” unambiguously includes a tornado. The Court examined dictionary definitions, statutory usage, and relevant case law, finding no persuasive authority that would exclude tornadoes from the scope of “windstorm.” Accordingly, the Supreme Court reinstated the trial court’s summary judgment in favor of the insurer, holding that the homeowners’ claim was subject to the policy’s windstorm deductible. View "PRIVILEGE UNDERWRITERS RECIPROCAL EXCHANGE v. MANKOFF" on Justia Law

Shirley and Ronald Cooper experienced a sewage backup in their newly built Mississippi home in 2022, resulting in significant damage. Their residence used a grinder pump system to handle household wastewater, which then pumped the waste to a city utility line. At the time of the incident, they held a homeowners policy with State Farm Fire and Casualty Insurance Company, which included a standard exclusion for damage caused by water or sewage from outside the premises, but they had also purchased a limited endorsement for backup of sewer or drain losses. After the incident, State Farm paid the Coopers under the dollar-capped endorsement. The Coopers claimed that State Farm’s adjuster, Dilley, represented that the primary policy would also apply, leading them to expend additional resources on remediation.After the Coopers sued State Farm for breach of contract, detrimental reliance, and other related claims, State Farm removed the case to the United States District Court for the Southern District of Mississippi. The Coopers voluntarily dismissed their claims against the adjuster. The district court granted summary judgment for State Farm, finding no genuine dispute that the source of the sewage was off-premises and concluding that the policy’s exclusion unambiguously barred coverage. The court also rejected the detrimental reliance claim, holding that any reliance on the adjuster’s statements was unreasonable given the clear policy language.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the summary judgment decision de novo. The Fifth Circuit affirmed the district court’s judgment, holding that Mississippi law imputes constructive knowledge of policy terms to insureds and that reliance on an agent’s contradictory statements is unreasonable when the policy language is clear. The court also found no genuine factual dispute regarding the off-premises source of the sewage, and summary judgment for State Farm was proper. View "Cooper v. State Farm" on Justia Law

A ceiling collapse at a construction site in New York injured three employees of a subcontractor, Vanquish Contracting Corporation. The general contractor, Reidy Contracting Group, LLC, had required Vanquish to procure insurance coverage that would protect Reidy as an additional insured. Vanquish obtained an excess liability policy from Mt. Hawley Insurance Company, which incorporated the terms of an underlying policy issued by Endurance American Specialty Insurance Company. After the accident, the injured Vanquish employees sued Reidy. Reidy sought defense and indemnification from Mt. Hawley, but Mt. Hawley denied coverage, arguing that Reidy was not an additional insured and that the Employers Liability Exclusion in the policy barred coverage. The United States District Court for the Western District of New York reviewed cross-motions for summary judgment. The district court found that Reidy was an additional insured under the policy and that the Employers Liability Exclusion did not bar coverage. The court reasoned that, based on the policy’s language and the Separation of Insureds clause, “the insured” in the exclusion referred to the party seeking coverage—here, Reidy, which did not employ the injured workers. Alternatively, the court found the exclusion ambiguous and construed it against Mt. Hawley as the drafter. The court also held that Mt. Hawley was precluded from contesting Reidy’s status as an additional insured because it failed to timely raise this argument as required by New York law. On appeal, the United States Court of Appeals for the Second Circuit affirmed the district court’s judgment. The appellate court held that Reidy qualifies as an additional insured and that the Employers Liability Exclusion is ambiguous; thus, the ambiguity must be resolved in favor of coverage for Reidy. The judgment granting summary judgment to Reidy and Merchants Mutual Insurance Company was affirmed. View "Reidy Contracting Group, LLC v. Mt. Hawley Insurance Company" on Justia Law

A fatal collision occurred near Sycamore, Illinois, when a tractor-trailer driven by an agent of Deerpass Farms Trucking, LLC-II struck a vehicle operated by Patrick J. Brennan, resulting in Brennan’s death. Deerpass Trucking, an interstate motor carrier, leased the tractor from Deerpass Farms and hauled a trailer owned by Conserv FS, Inc. Both the tractor and trailer were covered by commercial auto liability insurance: Great West Casualty insured the tractor, and Nationwide Agribusiness insured the trailer. After Brennan’s estate filed a wrongful death suit in state court, both insurers agreed their policies covered the entities involved but disputed which policy had to pay first for defense and liability costs.Great West filed a declaratory judgment action in the United States District Court for the Northern District of Illinois to resolve the payment priority dispute. Great West argued its policy provided only excess coverage, not primary, and further claimed its excess coverage was “excess over” Nationwide’s excess coverage. Nationwide counterclaimed, seeking a declaration that Great West’s coverage was primary. Applying Illinois law, the district court held that both policies were excess and that the insurers must share costs proportionately according to their policy limits. The court found the relevant lease and indemnity agreements did not render Great West’s coverage primary and rejected both parties’ alternative arguments about payment priority.The United States Court of Appeals for the Seventh Circuit reviewed the district court’s grant of summary judgment de novo. The Seventh Circuit affirmed, holding that both Great West’s and Nationwide’s policies provide excess coverage and that neither is “super excess” to the other. The court found no basis in Illinois law to recognize a distinct “super excess” tier and ordered the insurers to share costs proportionately to their coverage limits. The district court’s judgment was affirmed. View "Great West Casualty Co. v Nationwide Agribusiness Insurance Co." on Justia Law

A devastating fire occurred in Lahaina on August 8, 2023, resulting in over one hundred deaths and widespread property and economic damage. Following the fire, individually represented plaintiffs and class action plaintiffs filed lawsuits in state and federal courts against entities including Hawaiian Electric, Kamehameha Schools, the State of Hawaiʻi, and the County of Maui. These class actions were eventually consolidated and refiled as a single case in the Circuit Court of the Second Circuit. Through court-ordered mediation, parties reached a “global settlement” in August 2024, resolving all claims for a total of $4.037 billion, with a portion allocated to a class settlement fund.Prior to the present appeal, the Circuit Court of the Second Circuit coordinated complex proceedings, including appointment of a special settlement master and consolidation of cases. The court issued an order establishing exclusive jurisdiction over subrogation claims related to the settlement. After the settlement was publicized and the Hawaiʻi Supreme Court issued its opinion in In re Maui Fire Cases, which clarified that insurers’ exclusive remedy after settlement is a statutory lien under HRS § 663-10, Subrogating Insurers moved to intervene in the class action, claiming protectable equitable subrogation rights if some class members did not file claims.The Supreme Court of the State of Hawaiʻi held that Subrogating Insurers do not possess a protectable interest that justifies intervention by right or permissive intervention in the class action settlement under Hawaiʻi Rules of Civil Procedure Rule 24. The court found that the statutory lien process under HRS § 663-10 is the exclusive remedy for insurers, and settlement extinguishes subrogation rights, even if some class members do not claim settlement funds. The court affirmed the Circuit Court’s order denying intervention. View "Burnes v. Hawaiian Electric Company, Inc." on Justia Law

The dispute centers on an injury suffered by Catherine Dudley at a property owned by Michel Kanyambo and Speciose Mahirwe, which was insured under a general liability policy issued by Hudson Specialty Insurance Company. The policy, procured through intermediaries, was in effect from September 14, 2017, to September 14, 2018. Before the expiration, a renewal quote was relayed from Hudson’s intermediary to Kanyambo via their insurance agent, but Kanyambo and Mahirwe never received a written quote nor communicated directly with Hudson or its intermediary. They took no steps to renew, and no written notice of nonrenewal was sent to them. Dudley was injured on the property nine days after the policy’s expiration and, after settling her claims against the owners, she initiated a statutory “reach-and-apply” action against Hudson.In the Androscoggin County Superior Court, both Dudley and Hudson sought summary judgment on whether the policy was effective at the time of the injury. The Superior Court granted summary judgment to Hudson, reasoning that the owners’ receipt of the renewal quote via their agent meant Hudson was not required to provide written notice of nonrenewal. The court found there was no material fact in dispute and held the policy was not in effect, barring Dudley’s claims against Hudson.The Maine Supreme Judicial Court reviewed the case de novo. It concluded that under the plain language of Maine’s statutes, an insurer must send a written notice of nonrenewal before a policy terminates at its expiration, regardless of whether the insurer offered to renew. The statutory definition of “nonrenewal” encompasses any termination at the expiration date, and failure to provide the required notice means the policy does not terminate. The Court vacated the summary judgment in favor of Hudson and remanded for further proceedings, holding that Hudson was obligated to send notice and its failure to do so meant coverage remained in effect. View "Dudley v. Hudson Specialty Insurance Company" on Justia Law

A truck driver, acting as an agent for a trucking company, was involved in a collision with a vehicle driven by Bianca Spotted Thunder, which was insured under her father’s Liberty Mutual policy. After obtaining an unsatisfied default judgment against Bianca, the trucking company sought recovery from Liberty Mutual under the Spotted Thunders’ policy. Liberty Mutual had previously paid collision coverage but denied liability coverage, citing lack of cooperation from its insureds in the investigation and lack of notice regarding the lawsuit against Bianca.The Circuit Court of the Seventh Judicial Circuit, Pennington County, initially granted Liberty Mutual’s motion to dismiss for failure to state a claim, finding that notice of the suit was a prerequisite to coverage. On appeal, the Supreme Court of South Dakota reversed, holding that a third-party claimant need not plead satisfaction of conditions precedent in the complaint. On remand, Liberty Mutual moved for summary judgment based on noncompliance with policy conditions requiring cooperation and notice. The circuit court granted summary judgment, concluding there were no material facts in dispute regarding noncompliance.The Supreme Court of South Dakota reviewed the matter and clarified that while an insurer may raise noncompliance with policy conditions as a defense in a direct action, South Dakota’s financial responsibility statutes make liability coverage up to statutory minimums “absolute,” barring defenses based on policy conditions for that minimum coverage. However, insurers retain such defenses for excess coverage above statutory requirements. The court affirmed summary judgment in favor of Liberty Mutual for any excess coverage but reversed as to the mandatory minimum coverage required by statute, remanding the case for amended judgment in accordance with this distinction. View "Kaiser Trucking, Inc. V. Liberty Mutual" on Justia Law

GEICO and its subsidiaries brought a lawsuit in the United States District Court for the Eastern District of New York against Dr. Bhargav Patel and his medical practice, alleging that the defendants engaged in a scheme to defraud GEICO by manipulating New York’s no-fault automobile insurance system. GEICO claimed that from 2019 to 2023, defendants submitted approximately $3.4 million in reimbursement claims for treatments that were unnecessary, experimental, excessive, illusory, or not provided at all. These claims allegedly resulted from a fraudulent scheme involving kickbacks for patient referrals and the provision of services by unlicensed individuals or contractors.After GEICO initiated its federal action, the defendants responded by filing over 600 collection actions in New York state courts and arbitration tribunals, seeking recovery for disputed or denied claims totaling more than $2 million. GEICO, facing the prospect of fragmented litigation and the risk of inconsistent judgments, sought a preliminary injunction from the district court to stay all pending state and arbitration proceedings and to prevent the defendants from filing new collection actions until the federal court resolved the RICO claims. The district court granted the injunction, finding that GEICO had demonstrated irreparable harm, serious questions going to the merits, and a balance of hardships tipping in GEICO’s favor. The court also determined it had authority under the “in aid of jurisdiction” exception to the Anti-Injunction Act to enjoin the parallel proceedings.On appeal, the United States Court of Appeals for the Second Circuit reviewed the district court’s decision for abuse of discretion and found none. The appellate court held that the preliminary injunction was justified by the real risk of irreparable harm to GEICO posed by inconsistent judgments and the inability to fully adjudicate the alleged fraudulent scheme in piecemeal state actions. The Second Circuit further held, consistent with its recent precedent in State Farm Mutual Automobile Insurance Company v. Tri-Borough NY Medical Practice, P.C., that the injunction did not violate the Anti-Injunction Act because it was expressly authorized under RICO. The court affirmed the district court’s order. View "GEICO v. Patel" on Justia Law

A fatal shooting occurred in 2017 at an apartment complex insured by both a primary and an excess insurer. The decedent’s estate sued the insured for negligence and related claims. The primary insurer agreed to defend and, during the litigation, rejected three settlement offers that were at or below its $1 million policy limit. Eventually, the suit settled pretrial for $5 million. The primary insurer contributed its policy limit, and the excess insurer paid the remaining $4 million under protest, reserving its right to seek reimbursement.The excess insurer then filed suit in a California federal district court, claiming equitable subrogation against the primary insurer. The excess insurer argued that the primary insurer breached its duty of good faith and fair dealing by failing to settle within policy limits and that it was entitled to stand in the shoes of the insured to recover the $4 million paid. The district court, applying Nevada law, dismissed the claim, finding that Nevada precedent barred equitable subrogation when the underlying settlement was within the combined limits of the insurers. The excess insurer appealed to the United States Court of Appeals for the Ninth Circuit, which determined that Nevada law was unsettled on this question and certified the issue to the Supreme Court of Nevada.The Supreme Court of Nevada held that, under Nevada law, an excess insurer may state a claim for equitable subrogation against a primary insurer when the insured would have suffered a loss absent the excess insurer’s payment, regardless of whether the settlement was within the combined policy limits. The court explained that the excess insurer may assert any claims that the insured could have made against the primary insurer, including claims for failure to settle in good faith. The court answered the certified question in the affirmative. View "NORTH RIVER INS. CO. VS. JAMES RIVER INS. CO." on Justia Law